Proposal to Increase Membership Dues

1

• Proposal to Increase Membership Dues
• Mike Fischetti
• Executive Director
• Sam Smith
• Chief Financial Officer
• November 17, 2013

2
Agenda

• Proposal
• Current NCMA Financial Situation
• Options Considered to Address Financial Situation
• Third Party (MGI and ASAE) Dues Surveys
• Membership Benefits
• Dues Comparison
• Proposed Increase and Financial Impact
• Resolution Before the Board

3
This Proposal Will Recommend The Following
Actions

• Raise the member dues as follows
• Individual From 125 to 150
• Group From 105 to 115 (Average Rates)
• New Professional From 75 to 85
• Retired From 55 to 65
• Student From 25 to 35
• Pro Vita/Lifetime From 1,000 to 1,250
• Effective date of increase to be March 1, 2014
• The establishment of a communication and
  execution campaign to explain the rationale to
  members

4
Current Financial Situation

• Projected Operating Loss for FY 14 likely to be
  at least 40K
• External budget environment unlikely to improve
  in FY 15
• Conference scandal fallout, reduced procurement
  budgets, reduced contract staffing, reduced
  training funds
• No environmental changes foreseeable
• Meetings revenue stream (2nd largest for NCMA)
  consists of small number of high dollar events
  vulnerable to material loss
• Absent further reduction in costs or increase in
  revenues an operating loss is very probable in FY
  15
• Operating cash balance as of 11/13/13 - 1.6m
• Reserve balances as of 10/31/13 Restricted
  2.9m Unrestricted 208K
• Association reserves benchmark - 50 of Operating
  Expenses 3m
• Line of Credit facility - 250K not currently
  used

5
Current Financial Situation Revenue Streams

• Membership (33 of FY 13 Revenue) Flat
• Education (13) On-line learning revenues
  continue to grow and are main focus NES, Books
  no material growth expected
• Advertising (19) Remains soft and unlikely to
  grow in the short term sensitive to economic
  environment
• Certification (4) Growing but least material
  of revenue streams
• Meetings (31) Most affected by economic
  environment and Government curtailment on travel
  WC FY 14 attendance down 32 from FY 13.
  Meetings expected to be flat at best in FY 15
  unless change in Government policy

6
Options Considered

• 1 Draw Down on Reserves
• - Reserves intended to be used when no other
  alternative available as in FY 03 and FY 04 when
  Operating Cash was zero and there was no line of
  credit. Drawdowns were FY 03 425K, FY 04 100K.
• - In FY 08 financial crisis no draw down was
  made. Cash managed using cost reduction and line
  of credit
• - Unlikely that current economic environment
  will improve in the short term.
• - Probable that when improvement occurs business
  activity will not return to pre downturn levels
• - Thus absent any significant improvement in
  revenue further draw downs would be necessary
• - Current Operating Cash balance 1.6 million,
  L of C 250K unused
• Recommendation Not recommended. Seek
  additional revenues .

7
Options Considered

• 2 Fund projected operating losses in FY 14 and
  probably FY 15 out of Operating Cash balances
  (Currently 1.6m) and Line of Credit (250K)
• - Short Term proposition only
• - Risks
• - Bank will hesitate about renewing Line of
  Credit unless they see a plan to return to an
  operating surplus
• - Mortgage covenants may not be met
• - Third parties (e.g. Marriott Hotels) may be
  less likely to extend 30 day net credit and
  demand substantial upfront payments for
  conference costs
• - May generate footnote comment in audited
  financials
• Recommendation Not recommended

8
Options Considered

• 3 Staggered Approach Small Dues Increases
  Every Year
• -Unlikely to restore profitability in FY 14
• -Annual increase may result in negative member
  feedback
• -Increased administrative cost
• Recommendation Not recommended
• 4 Full Dues Increase, but Permit Member Payment
  by Installment
• - Significantly increased administrative cost
• - Additional burden on members e.g. four
  payments per year vs. one
• Recommendation Not recommended

9
Options Considered

• 5 Install Automatic Triggers which would
  Generate a Dues Increase
• - Could be based on inflation, time elapsed
  since last increase, industry benchmarks.
• - May or may not bear any relationship to NCMAs
  actual business needs
• - May appear arbitrary to members for example
  if the trigger increases dues every two years it
  may or may not be necessary from a business
  perspective.
• Recommendation Not recommended

10
Options Considered

• 6 Further Cost Cuts
• All costs have been reviewed over the past year
  and significant cuts made (FY 14 EAC - Total
  Expenses down 560K from FY13 Actual)
• Four staff have been laid off in the last 14
  months
• - Further cuts risks visible reduction in
  services to members OR employee benefits, risking
  employee morale and retention
• For example a major monthly cost (22K) is
  the production and distribution of the CM
  Magazine. The number of editions could be
  reduced to nine per year. The downside is that
  all member surveys indicate CM Magazine is seen
  as principal member benefit
• Annual health care costs total approximately
  225K. Will be reviewed in March prior to
  anniversary date and when effect of Affordable
  Care Act has become clearer

11
Options Considered

• 6 Further Cost Cuts (cont.)
• - Comparative ratios indicate NCMA costs already
  compare favorably with other associations. NCMA
  ratios in the most recent EAC (September 2013)
  are set out below
• - Salaries and Benefits as a Percentage of
  Revenues
• NCMA 38.6 - ASAE Average 42.2, Median 41.4
• - Number of Employees (FTEs)
• NCMA 24.95 ASAE Average - 37.0, Median
  36.0
• - Revenue per Employee
• NCMA - 239,014 ASAE Average 229,975, Median
  192,547
• Recommendation Not recommended. However the
  ED will continue to develop business
  efficiencies
• (Source ASAE Operating Ratio Report 14th Edition
  Based on 2011/2012 Data)

12
Options Considered

• 7 Dues Increase
• Recommended see following slides

13
Association Survey Results

• Source 2013 Marketing General Inc. (MGI)
  Membership Marketing Benchmarking Report
• Data based on 695 Association responses
• MGI is a consulting firm, founded 35 years ago,
  based in Alexandria, VA and a market leader in
  advising associations on membership strategy and
  growth

14
How Often Does Your Association Raise Membership
Dues ?

• As Needed 63
• Annually 22
• Every Other Year 6
• Never 9
• Source MGI

15
When Was The Last Time Your Association Raised
Membership Dues ?

• 2013 (Raised or Planned) 24
• 2012 21
• 2011 11
• 2010 9
• 2009 8
• 2008 5
• 2007 3
• Prior to 2007 19
• 56 of Associations have raised their dues since
  2010 the last time NCMA dues were increased.
• Source MGI

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How Much Are Your Basic Membership Dues ?

• Under 50 7
• 50 - 99 17
• 100 - 149 10
• 150 - 199 12
• 200 - 299 13
• 300 - 399 10
• 400 - 499 3
• Above 500 10
• Varies By Group Size 18
• Over 66 of Associations in the survey had dues
  higher than NCMA
• Source MGI

17
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Dues Comparison with These Associations

• American Bar Association (ABA)
• FL Association of Public Procurement Officials
  (FAPPO)
• National Procurement Institute (NPI)
• Association for Operations Management (APICS)

• Project Management Institute (PMI)
• Institute for Supply Management (ISM)
• National Institute of Governmental Purchasing
  (NIGP)
• Society of Cost Estimating and Analysis (SCEA)
• Association of Proposal Management Professionals
  (APMP)
• American Institute of CPAs (AICPA)

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Benefits Comparison

• The comparable associations share the following
  benefits with NCMA
• Magazine
• Journal
• Newsletters/Articles
• Networking Opportunities
• BOK
• Certification
• Conference/Training Events
• e-Learning webinars, e-courses
• Volunteer/Leadership Opportunities

20
Dues Comparison
Association Regular
AICPA 505-795
ASAE 295-325
AMA 250
NPI 210
APICS 205-210
ISM 190
NIGP 185
PMI 149 - 179
NCMA 125
APMP 100-125
ABA 60 If US licensed
ICEAA 55
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Proposed Increases In Dues Rates
Membership Type  Current Rate Proposed Rates Increase Increase
Regular 125 150 25 20.0
Group 105 115 10 9.5
New Professional 75 85 10 13.3
Retired/62 plus 55 65 10 18.2
Student 25 35 10 40.0
Pro-Vita/Lifetime 1,000 1,250 250 25.0
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History
NCMA Rate Increase History
Effective Date Annual Dues Increase
3/1/14 Proposed 150 25 20
7/1/2010 125 15 -13.6
7/1/2007 110 10 -10
7/1/2002 100 15 -17.6
4/1/2000 85 13 - 18.1
1/1/1997 72 7 - 10.8
1/1/1992 65 5 8.3
7/1/1988 60 15 33.3
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Annual Financial Impact of Proposed Increase
Membership Type  of members Current Rates Proposed Rates
Regular 9,475 1,184,375 1,421,250
Group 7,167 752,535 824,205
New professional 1,367 102,525 116,195
Retired/62 plus 635 34,925 41,275
Student 302 7,550 10,570
Pro-Vita/Lifetime 149 One time Only One time only
Total Revenue 2,081,910 2,413,495
Increased Annual Revenue 331,585
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Proposed Timing of Dues Increase

• Effective Date March 1, 2014
• Accelerated renewal program from January 1 to
  February 28, 2014 to allow members to renew at
  existing rates prior to March 1, 2014

25
Current Value of Member Benefits

• CM Magazine 158 Free to members
• Journal 15 Free to members
• Preferred Pricing
• Conferences 100 per conference
• Certification Applications 125-150 per app
• NES 50-75 per NES
• Books 10-15 per book
• Virtual Conference 20 per VC

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Member Value Enhancements

• 2 free professional development webinars (Value
  2 x 189 378
• 1 Webinar on Demand (Available only to members)
• Adding new chat now feature to auto connect
  members to member services
• New member gift at 6 month anniversary
• Outreach to group memberships
• Gift for Point of Contact with reminder of
  renewal date
• NCMA leadership outreach

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Member Response to Dues Increase

• The past three increases in dues have resulted in
  no discernible decrease in membership numbers.
• NCMA dues remain low in comparison to other
  associations
• Business environment is not good but more
  reason to maintain connection with profession
  through NCMA membership
• Conclusion - Reasonable basis to assume no
  significant loss of members

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NCMAs Mission Values

• Excellence in everything we do, especially our
  service to our members and CM community
• Continuing education and training
• Remaining the preeminent source of professional
  development for contract professionals
• NCMA cannot continue to uphold these values with
  additional cost cuts
• Source http//www.ncmahq.org/About/content.cfm?It
  emNumber9018navItemNumber519

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Recommendation

• NCMA Board of Directors approve the following
• Membership dues to increase as follows
• Individual From 125 to 150
• Group (Avg. Rate) From 105 to 115
• New Professional From 75 to 85
• Retired From 65 to 75
• Student From 25 to 35
• Lifetime From 1,000 to 1,250
• Effective Date of Increase to be March 1. 2014
• A Communication and Execution Campaign to Explain
  the Rationale to Members Beginning in December
  2013